Thursday, December 20, 2012

Two Philly Firms Sued Over Former Partner's Alleged Fraud

The law firms of Blank Rome and Cozen O’Connor are under fire from real estate investors who say that a former partner who worked at both firms cheated them out of millions of dollars on a phony development project, according to media reports. The investors filed a suit in the Southern District of New York this week, according to a report from Reuters.

The investors, led by Berish Berger, allege that Charles Naselsky, who was disbarred last month after having been convicted for an unrelated tax evasion scheme for which he will serve 70 months in prison, conspired with Philadelphia real estate developers to get the investors to put millions of dollars into a project that wouldn’t be able to be built. They claim to be owed $27 million, according to Reuters’ report.

Naselsky isn’t a defendant in the case, but two of the Philadelphia law firms at which he worked are.

Naselsky worked at Cozen O’Connor for four years before joining Blank Rome in July 2006, the year that Berger invested in a development project called River City. The project was billed as being a 12-million-square-foot mixed-use development that would include skyscrapers, according to the report. But in December of 2006, Philadelphia imposed a height-limit that would preclude the 600-foot skyscrapers.

Berger alleges that Naselsky, who was the lawyer for developers Ravinder Chawla and Richard Zeghibe, helped the pair hide the city’s plan for the height ordinance from Berger, according to the report.

In a separate suit stemming from the same project, Berger won a jury verdict of over $34 million from Chawla and other defendants in the Eastern District of Pennsylvania in 2010 after he alleged fraud. Naselsky wasn’t a defendant in that case and neither were the law firms.

In his most recent lawsuit, Berger alleges that Cozen O’Connor and Blank Rome conspired to defraud him and aided and abetted Naselsky’s scheme, according to the Reuters report.

“We didn’t enter in to any kind of conspiracy to defraud anybody,” said Thomas A. “Tad” Decker, CEO of Cozen O’Connor. The firm intends to “vigorously” defend itself, he said.

“We have reviewed the complaint,” said Kate Tavella, spokeswoman for Blank Rome. “Blank Rome denies any fraud on the part of the firm, and we intend to defend the action vigorously,” she said in a prepared statement.

Chawla had planned to flip the River City property after having bought it for $32.5 million, according to an opinion issued earlier this year by the U.S. Court of Appeals for the Third Circuit affirming the district court’s denial of the defendants’ challenges to the verdict. Chawla then engaged with various other people, defendants in the earlier suit, to coerce Berger to invest in the property, according to the opinion.

Saranac Hale Spencer can be contacted at 215-557-2449 or sspencer@alm.com. Follow her on Twitter @SSpencerTLI.